Tariff Policy - Hull's revolution

At this low ebb in the world economy, the administration of Franklin
Roosevelt entered office. The president's secretary of state,
Cordell Hull, determined to lower tariff and trade barriers. From his
first speech in Congress in 1908, this Tennesseean crusaded against the
protective tariff. Hull became a near-fanatical champion of liberal trade,
arguing that American prosperity depended on trade expansion encouraged by
a reciprocal lowering of tariffs. The Democrats forged an export-based
coalition of producers, workers, business, and bankers to support Franklin
D. Roosevelt's New Deal agenda and numerous reelection bids. Yet
materialism and politics were only one part of Hull's agenda. A
low-tariff policy, or freer trade, promoted lasting peace. Tariff wars
were part of economic rivalries that led to political tensions, he argued.
Expanded and mutually prosperous trade brought economic well-being and,
therefore, political stability and cooperation. Furthermore, reduced
duties freed the economy from governmental intrusion. Regimentation and
control of markets, as seen in Stalin's communist Soviet Union and
Hitler's fascist Germany, threatened liberty and democracy.

The secretary of state pushed for mutual tariff concessions under
reciprocal trade treaties and close adherence to the unconditional
most-favored-nation policy. He attacked Smoot-Hawley as detrimental to
U.S. interests and security. Liberal trade dovetailed with peace, he
declared, and high tariffs with war. Hull labored to remove tariff-making
policy from the clutches of self-interested congressmen and place it in
the executive branch, namely with the freer-trade State Department and
president. Using the lure of the large American market, he pursued
reciprocity agreements with the revolutionary trade legislation that
accomplished his agenda: the Reciprocal Trade Agreements Act (RTAA) of
1934.

Although Roosevelt was at first a lukewarm liberal trader, preferring
instead nationalistic and unilateral solutions to the Great Depression,
the president endorsed the RTAA. This began a new relationship of the
tariff to diplomacy. The legislation, renewable every three years or so,
amended the Smoot-Hawley Act, giving the president authority to negotiate
bilateral agreements that raised or lowered tariff rates up to 50 percent
on the condition that the other nation grant U.S. products reciprocal
access to its markets. Each agreement included the unconditional MFN
clause so that the concessions would apply to third parties. Congress
would renew the RTAA but would not vote on any agreement, thus eliminating
lobbying in the tariff process.

Protectionists were not routed, however. The president would seek advice
from the Tariff Commission, as well as the departments of state, commerce,
and agriculture, before engaging in commercial negotiations. The public
would be given opportunities to be heard. The president could not transfer
goods between the free and dutiable lists. And the preferential
relationship of exclusive trade arrangements with Cuba would stand. Hull
would not depart from previous tariff policies that granted cautious
concessions and pushed nationalism to the fore. For instance, he ignored
Australian requests to enter negotiations for months, and then protested
when Canberra adopted certain restrictive measures. To many Latin American
nations, the Hull program seemed bent more on U.S. export expansion than
mutual, reciprocal benefits. An RTAA pact signed with Cuba just after
dictator Fulgencio Batista came to power in 1934 did not stimulate the
island's economy but instead tied the nation closer to the United
States in a dependent relationship.

But Hull's philosophy represented a major shift in tariff policy.
Protectionists railed that the RTAA meant unilateral economic disarmament
on the part of the United States. The RTAA accord with Cuba, for instance,
pursued political stability through economic dependence with the United
States. In 1935, Hull signed an agreement with Belgium, offering the
maximum 50 percent reduction in tariffs on many competitive products,
including steel and cotton textiles. The goal was to open up
Belgium's market for American automotive products, apples, and
wheat flour. In fact, the accord gave one-sided benefits to Belgium, even
allowing the nation to rescind some of its concessions. This pattern of
sacrificing domestic industry for the imperatives of export expansion and,
overall, for foreign policy goals, became a basic pattern that remained in
RTAA negotiations well into the 1970s. Even though government experts
found substantial discrimination abroad against U.S. goods, Hull decided
to negotiate reciprocal trade pacts with as many nations as possible,
except for aggressors like Germany and Japan. The State Department took a
conciliatory position toward RTAA countries, oftentimes allowing imports
into the United States to surge past, and even damage, home interests. The
reason for such sacrifices lay in foreign policy objectives.

By the end of the twentieth century, many commentators lamented Hullian
liberal trade logic as self-destructive, naive, or unwise. They accused
tariff liberals of economic appeasement and of trading away American
interests for illusive foreign policy goals. Yet the RTAA did not
dismantle trade barriers, nor did they produce anything more than modest
export expansion for U.S. farmers and manufacturers. Imperial preferences
remained in force. But Hull was satisfied, for he had world politics, not
economics, in mind as he negotiated agreements. He agreed that
international affairs, and specifically matters of democracy, security,
and peace, lay at the heart of the RTAA and American tariff policy. By
1937, in a policy enduring into the next millennium, officials elevated
internationalism above domestic economic well-being. By doing so, they
transformed tariff policy from its protective guise to one of expansion
and liberalism. As the world headed for another war, the Roosevelt
administration used tariff policy to group together a coalition of
democracies to confront militarist aggressors in Europe and Asia.